PEA offers first look at Palmer Mine plan

Constantine Metal Resources Ltd. June 3 released a preliminary economic assessment for Palmer that outlines an economically robust and environmentally conscientious mine for the volcanogenic massive sulfide project in Southeast Alaska.

"This PEA is the most significant milestone for Constantine to date, demonstrating a high-quality project with strong economics and a progressive, environmentally conscious mine design," said Constantine Metal Resources President and CEO Garfield MacVeigh.

The PEA looks at a 3,500-metric-ton-per-day operation at Palmer that would produce 1.07 billion pounds of zinc, 196 million lb of copper, 18 million ounces of silver, 91,000 ounces of gold and 2.89 million metric tons of barite over an initial 11-year mine life.

This operation is based on 4.68 million metric tons of indicated resource averaging 5.23 percent zinc, 1.49 percent copper, 30.8 grams per metric ton silver, 0.3 percent gold and 23.9 percent barite; and 9.59 million metric tons of indicated resource averaging 4.95 percent zinc, 0.59 percent copper, 69.3 g/t silver, 0.39 g/t gold and 27.7 percent barite.

Underground mining would begin at the Palmer (Southwall-RW) deposit, which currently hosts all the indicated resource and about 56 percent of the inferred resources. During the third year of operation, AG Zone, a nearby underground deposit that hosts the balance of the resource, would be mined in conjunction with Palmer.

The mill would initially operate at 2,700 metric tons per day, increasing to the 3,500 t/d capacity during the third year.

The capital costs to build this mine are calculated to be US$278 million, which would be split between the Constantine Mining LLC Joint Venture partners, Constantine (51 percent) and Dowa Metals & Mining Co. Ltd. (49 percent).

A wide margin between operating costs and the value of the metals being mined creates compelling economics for the mine.

According to the PEA, the operating and sustaining costs to mine each ton of ore material is US$65.40. With a net smelter return (the net value of the metals recovered at the smelter) of US$150.60 per metric ton, the net operating income is US$81.40 per metric ton, after royalties.

As a result, the operation is forecast to have a post-tax net present value (7 percent discount rate) of US$266 million; a 21 percent post-tax internal rate of return; and a payback period of 3.3 years.

This is calculated using a base case metal price of US$1.22/ lb zinc, $2.82/lb copper, $16.30/oz silver, $1,296/oz gold and $220 per metric ton barite.

"Quality North American development-stage zinc-copper projects are in scarce supply, particularly projects with high operating margins and resilience to low metal price environments as demonstrated by the Palmer PEA," said MacVeigh.

Pacific Rim locale

One of the reasons for the compelling economics is Palmer's locale, about 40 road-miles from a deep-sea Pacific Rim port at Haines.

The Palmer Mine would produce three concentrates – copper, zinc and barite – that would be shipped to market.

The copper and zinc concentrates would be trucked to Haines and then barged about 15 miles to the existing Skagway Ore Terminal, where they could be loaded on ships destined for Asian smelters.

Barite concentrate will be placed in one-metric-tons sacks and loaded into containers before being trucked to Haines and then barged to the ship-to-rail container terminal in Prince Rupert, British Columbia. The final destinations for the barite concentrate include both western Canada and mid-west United States oil basins.

More than 90 percent of the barite sold in the United States last year was used as a weighting agent in fluids used in the drilling of oil and natural gas wells.

Currently, the U.S. imports roughly 86 percent of its barite, primarily from China. As a result, the U.S. Geological Survey has included barite among the 35 minerals and metals considered critical to the United States.

Thanks to the high quality of the barite and location, Palmer could provide a domestic source of this critical mineral.

Small footprint

Providing the U.S. and Canada oil basins with high-quality barite also has the advantage of helping to reduce the environmental footprint of a mine at Palmer, a top priority for Constantine.

More than 30 percent of the material mined would be shipped to markets as barite zinc and copper concentrates, helping to reduce the mined materials that would need to be stored as tailings.

Constantine Metal Resources Vice President of Exploration Darwin Green said "very conscientious, progressive" mine design is the other half of the environmental equation at Palmer.

This includes producing a fourth concentrate that contains the potentially acid generating (PAG) pyrite, which will be placed back underground as backfill. Some of the inert, non-PAG tailings would also be stored underground.

This leaves a very small amount of inert tailings for surface storage, which would be placed in a dry stack filtered-tailings facility.

Dry stack is an environmentally preferred method of surface tailings storage.

With this scoping level study now complete, Constantine will sit down with its joint venture partner, Dowa Metals & Mining to evaluate next steps to advancing a mine at Palmer while continuing to focus on expanding the resources and exploring other deposits across the property.

Green said the long-term vision is to define a resource that will support a profitable, low-impact mining operation at Palmer that will provide zinc, copper, silver, gold and barite to world markets for decades.

The Constantine team believes the project has all the geology, location and business connections to support this vision.

"What sets the Palmer project apart from its peers is excellent access by paved all-season highway and secondary roads, close proximity to an existing Pacific port ore terminal, reasonable and manageable capital costs, significant district-scale upside for additional mineral resources, and a joint venture that includes a global leader in the zinc smelting business," said MacVeigh.

–SHANE LASLEY